Okay, good afternoon, everyone. I'm Vik Chopra from the Wells Fargo MedTech Equity Research team. Pleased to introduce management from Alphatec for this session. Joining us from the company are Todd Koning, EVP and CFO, and Robert Judd, VP of Finance. Thank you both for being here. Thanks for having us. Let's start off with a few big-picture questions. You know, the stock sold off pretty significantly after you reported Q2 results. I wanted to ask you what investor feedback you've gotten, and what investors are focused on. Yeah, Vik, I think clearly, you know, the cash flow and cash usage in 2024 is of kind of near-term concern, helping people understand how our cash walks from, you know, what we did in Q1, Q2, down to Q3 and Q4, and then where we land on the full year, and then how you get to a cash flow breakeven next year. That has been kind of really the first two questions, the 2024 and 2025 question, that we field a lot, and I presume you'll answer those questions for us subsequently. I certainly will. But then I think ultimately, you know, as you kind of get yourself comfortable with that and comfortable with the level of capital we have access to and where we're at and how that gets us through to into next year and through next year, then I think the focus and the discussion then kind of returns back to top line growth, sustainability, how you expand operating margins, and through that operating margin expansion, how that ultimately funds your need for additional investment sets and inventory to continue to support the growth of the business and getting into a cash flow generation position in 2026 and beyond. Okay. So let's just jump right into the cash burn. You updated your guidance for full year free cash flow burn to $125 million-$135 million of usage. Just remind us what's driving the higher than expected cash use versus your initial guidance for the year? The increase was $25 million on the full year and in working capital. Really both components of that, one is in days sales outstanding, so about 10 million of that is in days sales outstanding, so an increase of about 5 days. The second component to that was an increase in inventory. Really, the days sales outstanding, ultimately, we went exiting 2023 at about 47 days. It jumped about 58 days in Q1 and then improved about 52 in Q2. We expected further improvement or more improvement than that, kind of coming out of that for a number of reasons. My assumption for the balance of the year is that we don't get any better on days sales outstanding, so kind of holding that Q2 exit rate through the year. And then on the inventory front, it's really one of mix, and mix in the context of the type of sets that you had. So essentially, nine months ago, we had to predict what we needed today, and because of the investment we made exiting last year, we did the raise. We invested a significant amount of capital and sets in inventory to support the surge in adoption and ultimately the sales reps that are coming on board. Because of the significant amount of investment, lead times were reasonably long, and so we had to make a forecast on what the demographics of our business would be, and ultimately, we didn't get that as right as it needed it to be. And so we find ourselves today with more cervical sets than we need. And the other type of mix is within a procedure. You have an interbody, and the other place that played out most meaningfully was in our lateral portfolio, where we have really three interbodies to choose from, a PEEK interbody, which is static cage. You have a titanium static interbody, or you have an expandable interbody. Ultimately, the demand for expandables really outstripped our expectation, and so as we sat exiting Q2, we really had more static titanium interbodies than we needed at that point in time, and not enough expandables, and so the bad news to that mixed story is that it's more spend in 2024. The good news to that mixed story is that it's spends you don't have to make in 2025. Okay, understood. And then just talk about how you see the rest of the year playing out from a cash flow perspective. You know, I know the cash burn came down from Q1 to Q2, but just talk about Q3 and Q4. Yep. So Q2 to Q3, really probably a step down from $20 million or so. We expect a $25 million-$30 million burn in the third quarter. That step down is largely due to a reduction of our investment in sets and inventory, so it's a reduction there. And then from Q3 to Q4, a further reduction in sets and inventory. Also, you do get a bit of an inflection as we start to generate more adjusted EBITDA than we did in the third quarter. So those combined kind of give you a $5 million-$15 million cash generation expectation in the fourth quarter, given a $125 million-$135 million full year expectation. Okay, so steps down again in Q3, and then free cash flow positive in- Correct. Q4. You know, you said previously that the ratio of asset investment to dollars of one year of surgical revenue growth is about $0.75 to $1. But, you know, we did the math, and it looks like the spending is sort of more than double that in the first half of the year. Should we expect this level of investment to continue, or does this sort of come down, you know, in 2024, and then more significantly in 2025? And that's a really important point because as we just talked about, it is how you get to a cash flowing Q4, which is the investment sets and inventory goes to very, very small in the fourth quarter. And then as you exit this year, if you look at what we invested in 2023 and look at what we invested in 2024, we've probably invested $1.10-$1.20 for every $1 of revenue growth. So, and that's on purpose. That's we did the raise for that reason, to essentially create that asset base to support and the increased surgeon adoption and the sales reps that are coming along with that. What that means is you have an asset base that can support revenue growth in 2025, and so therefore, you don't have to invest at that same ratio in 2025. In fact, if you invested at a, say, 50% on the dollar ratio in 2025, if you looked at it over the course of the three years, 2023, 2024, and 2025, you'd probably be at, like, an 85% ratio. So still even a bit richer than our 75 cents on the dollar. And so ultimately, I think that's what gives us confidence that that's the right level of investment in 2025 and supports the growth. I think further to that, that's ultimately how you get to cash flow break even next year, as clearly we continue to grow, profitability expands, and you're spending significantly less on sets and inventory in 2025 than you have previously. Okay, so we should expect the investment in sets and inventory to sort of decline significantly in 2025? Correct. You're still expecting to achieve free cash flow break even next year? Correct. Okay. I'm sure you've gotten this question many times today and yesterday as well, but do you need to raise cash again before turning free cash flow break even in 2025? We don't ultimately, and I think, you know, there's a commitment from our end to not dilute shareholders. Okay. Just on your, I mean, taking a comprehensive update on the free cash flow dynamics. You know, you're guiding to about $602 million in revenues this year, 25% organic growth. What are some of the puts and takes we should be considering for this year, for the back half of the year, specifically? Yeah. If you look at, if you look at our, our guidance, and particularly our, our surgical revenue guidance, it implies kind of mid to high single digit, volume growth, and ultimately kind of, sorry, mid to high teens volume growth and mid to high single digit revenue per surgery growth. You know, as you look at that, and as you look at how we, really how we performed in the first half of the year, and you think about the leading indicators of surgeon adoption, which is north of 20% in the first half, and you look at, the amount of surgeon engagements, you know, I think those are good tailwinds going into this year and going into next year. Clearly, we saw a step-up in revenue per surgery, in the second quarter. Our expectation and the math that our guidance implies is that that revenue per surgery, in absolute dollars, really holds constant through the second half. Okay. Let's talk about rep recruitment. Can you talk about how you're benefiting from the disruption in spine? Yeah, we can. So I would tell you that the disruption in spine has been, and I think will continue to be for multiple years, a tailwind for us. I think one of the things that we know is the results of today are a reflection of the work, the investments that you've put in 12-18 months ago, and so I think we're starting to see that. You know, clearly, we did the raise in October of last year, predicated on this opportunity. We've been reasonably public about the places we've added significant and meaningful sales distribution over the last 12 months, whether that be New York and New Jersey, Southern California, the Northwest. You know, we've talked about growing in Chicago and Missouri as well. Missouri as well. And so we've been reasonably public about those locations. In many of those locations, we either didn't have great representation or we didn't have any. And so ultimately, I think that's been a meaningful investment for us over the last twelve months. And so then you kind of say, "Well, at a rep level, are you seeing the type of interest?" And I would tell you that the interest level continues to be very strong. There is a ton of interest in what we're doing. And I would tell you that that is first and foremost surgically, so from a surgeon standpoint, because ultimately, as you know, clinical distinction drives surgeon adoption, and it's the surgeon adoption that ultimately compels a sales rep to come over. Because a guy who's making full commission is gonna wanna make sure that if his surgeon is interested in joining Alphatec, that he or she is gonna be paying attention to where they wanna go and what they wanna carry. I would just also point to the surgeon events that we had in Q2. Because of that dynamic Todd just talked about, that surgeon interest is really a reflection of the competitive wins that either have happened or are in the process of happening. So when we look at that, that's a leading indicator of surgeons being compelled by the technology, which is ultimately... Many of those surgeons that came through in Q2 were competitive surgeons that had either that the territory had recently flipped or frankly, some of them, the territory hasn't flipped yet, but they're still there, and they're interested, so. Okay, and are you onboarding reps at the pace that you expected in twenty twenty-four? I would say yes. Okay. And what about the rep recruitment funnel? Is that as strong as it was when you did your raise last fall? It is, well, I mean, even from last fall, I'd say it's better, stronger from maybe a year ago. You know, I expect that this disruption is ultimately going to be a multi-year tailwind for this type of activity. You know, I think we're, you know, we're kind of in the first year of it. Okay. I would say, too, you know, the disrupted companies that we spoke of, we've been really speaking of for the last nine months. I think the disruption there is like we expected. I think one of the, you know, additional things that we've seen is there's been broader disruption in the market. The disruption among the companies where there's consolidation has really bred, I think, a little bit of uncertainty in the rest of the industry. And so we're seeing a fertile ground for recruiting amongst, you know, really the whole market share. And so I think that's probably something I don't think we totally appreciated when some of these disrupting factors really hit the stage, you know, a year ago or so. Okay. It's a good point, Robert, because on our Q2 call, we did share a slide that kind of showed the pie chart- Yeah - of where people are coming, and I think that's more representative of the overall market share than any one single, singular company in particular. Okay. And are there any obvious gaps from a geographical perspective in the U.S. that you think you're lacking? I mean, there clearly is. You know, we're still, from a market share standpoint, reasonably small. Right. And so now I think we've made great strides in some of the biggest areas, but you know, we're not really influential in Miami at this point, for instance, not to the level that you need to be. I think there's, Pat loves to talk about Georgia, you know, Macon, Augusta. Yeah. I don't know, there's another city there. Anyways, the point being is these are big $20-$30 million markets that we don't have representation in. You know, we've got some good representation in Atlanta, but there's a whole- Right - another swath of Georgia there. So I think the point is, there's plenty of open territory. I think one of the things that you'll see us do more of this year, though, is rather than focus on big open territories, it's going to be to continue to feed the territories where we are today, and ultimately add adjacencies to the existing footprint. And you know, along with that kind of comes, I think, a higher resolution to the growth in those areas, the cost, and it becomes a more asset-efficient growing algorithm as well because you can utilize the assets that are within that territory better. You know, one of the more asset-intensive things we do is place a big new sales territory in a de novo territory or say, excuse me, a new sales agent in a virgin territory, and so I think that's something you'll see more of us do, which is kind of the growth through greater penetration of the existing footprint. What, what can you share about the cadence of the competitive rep recruitment targets that you have, and what you're expecting for 2024? I know you haven't put numbers around it, but just maybe at a higher level, just talk about that. Yeah, I think conceptually, you know, at the end of the day, rep recruitment is always gonna follow, surgeon adoption and interest. And so, you know, I think to the extent that surgeon adoption represents and looks like what we've had this year, in the first half of this year, surgeon adoption's grown at 20%, then I think you'll see a rep recruitment that is, somewhat, similar to what we saw this year. Keeping in mind, our long-range plan assumes a 10% surgeon adoption rate to drive the high teens volume growth that we've seen. Okay. What's the latest in your robot launch plans? Yeah. I think things on with Valence are moving along as planned. We're doing cases today. Most of those cases are with family and friends, where we're trying to get clinical feedback, so we can then work that back into the technology. As we've said before, our goal isn't to just do what's largely being done today, which is place pedicle screws with the robot. We want it to be integrated with our procedure, and that's where we see... as you think about Valence, there's really, you know, two broad swaths of how we add value. One is we use it differently than how robots have been utilized to date, which is we integrate it with the procedure, and it does the more challenging elements, or it assists with the more challenging elements of the surgery, which are things like replacement of the, and navigation of the retractor, being able to do freehand navigation and use multiple instruments at one time within the surgical field. So I think our value add is one, doing that and really integrating it with the procedure and the workflow, which largely hasn't been done today. It really. If you look at the robotic solutions out there today, they're really a net add to the workflow, meaning they take from the setup time through finishing. They actually are additive to the workflow from a time perspective, and so we'd like to. Our one of the things that out of the gate, actually, when we bought that REMI asset, there had already been some stuff done by Dr. Pollina at the University at Buffalo, where he'd demonstrated that the workflow time was actually a net, you know, benefit relative to some of the bigger systems. And so that's one element. I think the other element is with the footprint and the cost point or the price point, there's an opportunity to compete in, you know, an ASC or a smaller community hospital, where from a footprint and a cost standpoint, they can't digest a big robotic system and, or maybe they're not volume to earn it out. So I think those are the things that make it competitive. As far as where we see that going is as you get into next year, we continue to get clinical feedback, implement that into the system, do the freehand navigation elements later this year and into early 2025. We expect to launch the system later in 2025. And so the real uptake from a driving pull-through, you know, probably honestly is 2026 and beyond. But you know, I think it's in use today, and that will continue to ramp as we get the clinical feedback and implement it into the technology. Okay, so launch in late 2025, more of an impact on revenues and pull-through in 2026? Yes. When do we see the robot? Next year at NASS? Yeah, definitely next year at NASS, for sure. I'm not entirely sure if it'll be at NASS this year, or how public we're gonna be about it- Okay - at NASS. But, I think as Robert said, like, it's currently being used by some friends and family to place pedicle screws so that we can ultimately get an understanding and get a feel for it. That ultimately will inform how we integrate it into procedures. Okay. And just talk about the integration of PTP and LTP into the robotic surgery. I think the key there is, I think as Robert said, retractor placement. I think one of the more difficult components of a PTP procedure is getting the retractor in the right spot. And so I think as you navigate that and you line that up with all of your anatomical markers, doing that in a less fluoro intense way. And I've been to, I don't know, a handful of PTPs, and my observation there is, for sure, the longest, seemingly hardest part of the surgery is actually getting the retractor where the surgeon wants it. And it's also very fluoro intensive. So if you can do that with a lot less fluoro and a little bit more efficiently based on navigating there, I think that's a benefit to everybody. Okay. And what have you said on ASP? I mean, I know it's cheaper, but how much cheaper? Around about $500,000- Okay - is kind of we're replacing it, and I think you've got some amount of that, associated with the navigation component and some of it associated with the robotic component. Okay. So two of the large orthopedics players have recently received approval for their spine robots. You know, what impact does this have on your ability to sell and develop your spine robot? I think, you know, to some degree, I don't think it changes our view on where we wanna go. I think the industry's view has been on large capital equipment, million-dollar price tag, and lock up a certain amount of volume in an account with that play. There's only so many accounts that have the kind of volume where that makes sense. Their focus has been on placing pedicle screws, and I think if Pat was sitting here today, he'd tell you that placing pedicle screws is not the most difficult part of spine surgery, and it doesn't mean it's not helpful, it's just probably not the biggest problem to solve. Mm-hmm. Which is why I think, as Robert talked about, you know, workflow can be challenging, and ultimately, you know, what problems are you solving with your surgical or navigation and robotic platform? I think our view is how do you make it workflow beneficial, as well as, helping navigate some of the more complex parts of the procedure. And so, given the price point, I think our opportunity is to ultimately make it available to people, whether it be on a usage basis, because the footprint is small, and you could wheel it in, wheel it out. But also, if you think about the volume required to, you know, earn out a $500,000 piece of equipment- Mm-hmm - like, community hospitals can do that, ASCs can do that, in a way that they can't with, you know, a much larger piece of capital equipment. And then just this whole dynamic of the shift, the procedures to the ASC. What are you seeing with regards to spine? I mean, is it still? It's still early stages, I'm assuming. Yeah, still early stages. You know, I'd say that our mix is probably 5%, so very small. I think the point, though, is that group of people who are doing that are interested in the cost profile of the procedure and the capital equipment that they have available to them. As well as the fact that ultimately, success in the outpatient setting is a function of patient selection, which I think, you know, EOS can certainly be a part of that. But also ensuring that you've got a, you know, the least morbid procedure that you can have, and then I kind of think about, you know, lateral being a great opportunity to do that because, you know, less blood loss, much faster recovery, and probably good reasons that has. And so I think when you marry up, whether it be an EOS, SafeOp, and Valence, you know, I think our technology stack puts us in a pretty good spot to really be well-positioned for that shift as and when it comes. Okay. Stay tuned, I guess. Yeah. Let's shift gears to international. Just what's the latest on your international plans for twenty twenty-four, for twenty twenty-five, and what can we expect? When you look at our international strategy, we've really decided to go into a really reasonably limited number of markets. Part of that has been a function of really where do we want to grow, and what's the cost of that growth and kind of return on that investment? I know both Robert and I have been a part of companies where you have a reasonably sized international footprint, but you need a certain level of scale. And so as we looked at our strategy here, we wanted to go to markets that had pretty good pricing, where the surgeons still had a good influence on who was chosen, and people ultimately valued the procedural approach. And so you looked at Australia, New Zealand, and Japan as three like great examples of that. And so that's where you see us start. Our view is to create direct operations in those three markets, because that allows you to ultimately drive the clinical value and the benefit of what you're selling, to provide the great service, which should allow you to scale quickly and grow revenue sustainably and get greater penetration ultimately, because you own that engagement and that customer relationship as opposed to using a third-party distributor. So that's the strategy, to kind of go direct, get deep and narrow in those three markets. And so today, we're in Australia and New Zealand. We'll probably do our first case in the fourth quarter in Japan. Japan will be kind of a slow walk over the course of next year, and then ramping more meaningfully in 2026. Our long-range plan assumes that we'll be contributing about $30 million of international surgical revenue in 2027. Okay, helpful. You touched on EOS. You know, you launched EOS Insight in July. What's been the early feedback? Yeah, it's been very positive. You know, I think again, the technology became available right at the beginning of July, and so we have our first, I guess, installation of EOS Insight was at OrthoIndy in Indianapolis, and so a very positive feedback. I think if you think about what's been the experience so far, everyone has a quote-unquote planning the solution. I think the. But no one yet plans. And so what EOS Insight is doing is it's giving you automated surgical or automated measurements, and then it's giving you an automated surgical plan. So you don't have to do any effort. You can adjust it if you'd like, if you're the surgeon, but the plan comes pre-populated. So now it went from, "This could take me fifteen or thirty minutes per patient," to "It's just there." And so I think that's a big win. What furthers that is then you get into the OR, and part of the EOS Insight is the ability to reconcile intraoperatively with your plan. So you know you achieved the purposes of your plan. And so as we hear the feedback from the surgeons, particularly at OrthoIndy, like, that's the big win, is you can plan, which obviously you're gonna do more, 'cause now it doesn't, it's all workflow friendly, meaning, like, a surgeon's time is the most precious thing he has. And if it happens automatically, I'm gonna do it 'cause it saves me time, but then I can also measure the result against that plan, which is really the value add. Those things together are super encouraging. You know, it's small right now. I mean, there's a handful of users. Those users are gonna have to get more experience with it. We have an installed base in the U.S. of EOS units of about 230. About a third of those have EOS Edge, the newer version, which for those pieces of hardware, it's a software upgrade. For the older units, there will be a hardware upgrade required and a software upgrade. I mean, that's a upgrade cycle opportunity for us, capital perspective. But the surgeons that are using that, you know, are gonna get on the podium. There'll be research published. I think as you think about that, that process takes a year, and then you have that drives an order cycle and then an installation cycle that follows. So you think about the real revenue acceleration or contribution from EOS Insight, and that's probably two years out, right, from now, because you gotta have time for the surgeons to get the experience, for the publishing and the podium work to happen, and then for the order to install process to play out. So then just, you know, how should we think about contribution in 2024 and 2025? I think the 2024 contribution of EOS is implied in our guidance, about $65 million. And I think if you kind of look at the last couple of years, you've seen probably between $5 million and $10 million of revenue growth associated with EOS, and I think that's probably a reasonable place to- Okay -t o kind of be thinking about that. So expect that trajectory to continue? Yeah, I think so. Okay. I don't think it really steps up meaningfully until, to Robert's point, until we get some of this experience out there and try- Okay -you know, the experience validates the expectation, and once the expectation is validated, then I think the orders start to come more- Right -more meaningful, and What do you think is the most underappreciated aspect of EOS? I think it's to Robert's point of this automated measurements. The reason measurements are so important is because the documentation, the literature will tell you that alignment is the greatest correlative to a durable outcome. A durable outcome, as measured by hips or knees, is like a 1%-3% revision rate. Spine revision rates are anywhere between 10%-20%, depending on if it's a single-level or a multilevel intervention. And so that tells you that spine surgery is actually not all that good. And so when you get, ultimately, this automated alignment measures, you can use some normative values based on what the patient is, their age, their BMI, those types of things, and match that up and say, "Okay, here's where you need to be." That becomes your plan then. And so I think having that at your fingertips is information that I think every surgeon would say is valuable. To Robert's point, many people haven't done it because, well, what do I do with the plan? I can't tell if I've achieved my plan intraoperatively. And so I really do think that kind of this alignment, planning, and intraoperative reconciliation is very powerful. And then when you bake in the patient-specific implants in the forms of pre-bent rods that are available through Insight today, and as we get better on development on EOS or the next phase of development, getting a better understanding of bone quality, then you can start matching different types of implants with that bone quality. And so I think the underappreciated part of EOS is really what EOS Insight is going to bring to it, which I think mirrors its great imaging technology, which is unparalleled in the industry in terms of what it is and what it allows us to do, which is ultimately measure somebody preoperatively and measure somebody postoperatively. And because there's no magnification error, you can compare those images. That creates a great data set for you to better understand, hey, here's what the patient had when they started, here was the plan, here's what I did, here's what I got. And as you start to understand that, you can now gather some intelligence and then inform the future plans. And so we've got the data infrastructure in place, and I don't know how many images we have now, probably 7,000- Yeah, yeah. Well, more than 50,000, yeah. We got a ton of images, and so we're starting to collect that data, and I think our view is, as you get more and more experience of this preop, post-operative experience, you can then begin to better inform your surgical decisions over time. I think just to recap those comments, to me, it's like the measure of success for an enabling technology should be utilization, ultimately, and you think about, you know, there's a lot of discussion. I I mean, we talked about Valence for us, but robotic utilization is really low. I mean, if it's 20% penetrated in accounts, and then only 20% of those accounts actually or 20% of the cases in those accounts are using a robot or something like that, I mean, the utilization is super low. I think the underappreciated thing about EOS is when these things get installed, the utilization is through the roof. I mean, you're using them not only for every spine surgery, you're using them for every spine surgery candidate, and some of those don't end in a surgery or an intervention. And so these units that we install, the throughput you're getting, you're getting hundreds of images per week. So it's just, y ou're creating a stickiness to your business that I think is unparalleled from an enabling tech perspective. And I think that's probably underappreciated because the install base is relatively small, but as that grows and as EOS Insight is proliferated, I think that will play out more meaningfully. Okay. I wanted to touch quickly on your LRP. You've guided to $1 billion of revenues by 2027. You have a $600 million or so guidance for 2024. So $400 million of revenue dollar upside over the next three years, what gives you confidence that you can grow your top end at such a fast rate relative to your peers? Yeah, I think if you look at the growth over that time period, I think it's about $129 million of absolute dollar growth a year, roughly from 2023 to 2027. You know, our long-range plan, where we laid that out, it's about, you know, of that $129 million, $9 million of that's EOS, roughly on an annual basis, leaving about $120 million of surgical revenue. And so I think if you look at the overall surgical revenue growth being driven from a volume perspective, the volume is a function of utilization of your existing surgeons, and it's a function of adding new surgeons to your base. When I think about the utilization, I kind of understand that our historical utilization is always up and to the right, kind of regardless of the annual cohort who's joined. That utilization, it really is reflective of greater confidence in the company and broader adoption of the portfolio, as well as, I think we see this within PTP in particular, people adopt that procedure, and they use it in more complex pathology. I think you see that in different ways in terms of the utilization component. Our surgeon adoption assumption in the long range plan assumes 10% surgeon adoption over that timeframe. Essentially low single digit utilization increase, all of that contributing to a kind of mid to high single dig- or excuse me, mid to high teens growth in volume over that timeframe. And so what I understand today, we've been growing in the first half of this year, 20% on surgeon adoption. I think that's a great start to the long-range plan. I look at the level of distinction that we have in our portfolio. The tech stack that we have, I think is the best in the industry. We continue to drive penetration, and we have a ton of interest surgically, as evidenced by the surgeon trainings we've been doing or the surgeon training engagements. And so I think all of that bodes well from a adoption standpoint. The revenue per-procedure perspective clearly has some opportunity as we continue to see skew higher to lateral driving the growth, as we continue to add more complex things like corpectomy and expandables and get greater attach rate on our biologics, so that's kind of all the tailwinds associated with revenue for surgery as well, and so I think those are the reasons why I feel good about our growth algorithm. Great. I think with that we're at time, so thank you very much for coming. Thanks, Vik. Thanks for having me.